Question

Gaurav applied for 5,000 shares of ₹ 10 each at a premium of 2.50 per share. But he was allotted only 2,500 shares on pro rata basis . After having paid ₹ 3 per share on application, he did not pay allotment money of ₹ 4.50 per share (including premium) and on his subsequent failure to pay the first call of ₹ 2 per share, his shares were forfeited. These shares were reissued at the rate of ₹ 8 per share credited as fully paid .
Pass journal entries to record the forfeiture and reissue of shares.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Equity Share Capital A/c (2,500×7)	Dr.		17,500
	Security Premium Reserve A/c	Dr.		3,750
	To Equity Share Allotment A/c				3,750
	To Equity Share First Call A/c (2,500×2)				5,000
	To Share Forfeited A/c				12,500
	( 2,500 shares forfeited)
	Bank A/c (2,500×8)	Dr.		20,000
	Share Forfeited A/c (2,500×2)	Dr.		5,000
	To Equity Share Capital A/c (2,500×10)				25,000
	(Share reissued @Rs 8 per share fully paid-up)
	Share Forfeited A/c (12,500 – 5,000)	Dr.		7,500
	To Capital Reserve A/c				7,500
	( Profit on reissue transferred to Capital Reserve)

Working Notes:

WN 1: Calculation of Amount unpaid on Allotment

Amount received on application (5,000×3) = 15,000

Less: Amount adjusted on application (2,500×3) = 7,500

Excess amount received on application = 7,500

Amount due on allotment (2,500×4.5) = 11,250

Amount unpaid on allotment = 3,750 (11,250 – 7,500)

Note:

Rs 7,500 received on application will be transferred to allotment, but first of all we have to transfer such amount to Capital A/c and rest would be transferred to Securities Premium A/c. Capital on allotment is Rs 5,000 (2,500×2) that is fully received and balance amount of advance Rs 2,500 will be transferred to Securities Premium A/c. So, amount of premium unpaid is Rs 3,750 (2,500×2.5 –2,500).